Despite investors’ fears, this stock is “too cheap to ignore” according to Jim Cramer…
CNBC’s Jim Cramer has is eye on one tech stock, and it might surprise you.
According to Cramer, Dell Technologies (NYSE: DELL) is “ridiculously cheap” right now as investors are shunning the stock on concerns that an economic slowdown in China could impact the company’s business.
The stock rallied in May and rose as high as $70 per share, but since then, shares have sunk -24% and closed on Wednesday at $53.
Cramer says Dell’s stock has sunk over the last month after a “not-so-hot” fiscal Q1 earnings report in which the software company noted soft server demand and some weakness in China, both of which sent investors running for the hills.
“Between Dell’s China exposure, and a possible slowdown in their server business driven by a weaker economy, the stock can’t seem to get much traction,” Cramer said.
Investors are right to be concerned about the situation in China, Cramer said. Fears about China, which is the world’s second-largest economy, have been hazardous for the tech sector more than any other industry as the trade war has raged on.
But despite the China threat, Cramer likes Dell’s stock.
The company’s CEO, Michael Dell, said in March that a slowdown in China might not be as bad for the business as investors fear it will be. Cramer also noted that the company is “sticking to its guns” and is maintaining its full-year earnings forecast of $6.05 to $6.70 per share.
The host also believes the concerns over China are already priced into the stock, and the recent pullback makes for a good buying opportunity.
“If they can deliver those numbers, the stock is ridiculously cheap, trading at 8-times this year’s earnings, and just 6.5-times next year’s numbers,” Cramer said. “I think most of these China fears are already baked into the stock here after its pullback form $70 to $54.”
“The bottom line? Unfortunately, Dell’s stock is shackled to China, so it could get hit again next week if we don’t get any kind of trade deal from the G-20 meeting,” Cramer continued. “But if that happens, I think you can buy Dell into weakness. It’s still too cheap to ignore.”
Cramer isn’t the only one bullish on Dell.
Evercore ISI, Deutsche Bank, and JPMorgan Chase all gave positive ratings on the stock in June. Earlier this week, analysts at JPMorgan gave DELL an Overweight rating and boosted their price target from $77 to $80, suggesting possible up side of 50% over the next twelve months.
And earlier this month, Evercore initiated coverage of DELL giving it an Overweight rating and a price target of $75. Then this Tuesday, Evercore analyst Amit Daryanani released a bullish report on the stock, noting that shares have badly lagged the rest of the tech sector and VMware—Dell’s most valuable asset—so far this year.
Daryanani issued a price target of $90 for DELL – nearly 70% higher than Wednesday’s closing price.